Reshoring Will Accelerate: Businesses should fully assess supply chains first
Reshoring is the transfer of business operations back to its country of origin. The term is usually associated with manufacturing but it applies to any business operation.
The trend of reshoring back to the US from China began about a decade ago when some businesses realized costs in China (including labor and compliance and also transportation) were rising. Meanwhile automation was changing the cost equation for some business operations, making reshoring decisions easier. Over the last decade, tarrifs due to unfair practices and persecution of ethnic minorities added new motivation to reshore. The pandemic and China’s zero covid policy and resulting shutdowns of industry and transportation in China has now build an even stronger motivation to reshore, and the war in Ukraine has proven to any doubters the importance of having supply chains free of influence of totolitarian nations. The trend of reshoring will clearly accelerate.
The issues above are major drivers of reshoring. But there are many other benefits from the business operations perspective, including:
- The ability to operate with reduced inventories
- Reduced lead-times from order to delivery
- Potential improvements in quality
- Reduced management overhead
- Speedup of innovation
- Reduced compliance risk and complexity
- Reduction of total costs
There are other benefits to society that should translate to better government policies to encourage smart reshoring, including:
- Improved overall economic health
- Better food security
- Improved supply of pharmaceuticals
- Reduced support to totalitarian nations
- Reliability of weapon supply chains
- More efficient resource management
- Improving job market
The benefits of reshoring are strong, but like any other major change, reshoring can be done wrong. Failures in reshoring are not widely examined. Our research points to one major publicly examined case study of a failed reshoring effort in the last decade. This should make planners nervous. Drawing conclusions from one major failure a decade ago could lead to concern over issues that are not relevant today
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